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Showing 101 to 120 of 699 Records
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2008 (5) TMI 662
Issues Involved:
1. Delay in filing the appeal.
2. Disallowance of expenditure of Rs. 6,71,60,000.
3. Nature of liability incurred by the assessee.
4. Applicability of Section 43B.
Summary:
1. Delay in Filing the Appeal:
The appeal was delayed by 15 days. The assessee explained that the delay was due to the appeal papers getting mixed up with other documents and being found only on 19-10-2005. The Tribunal found the explanation bona fide and condoned the delay, admitting the appeal.
2. Disallowance of Expenditure of Rs. 6,71,60,000:
The assessee claimed a deduction of Rs. 6,71,60,000 as expenditure incurred on the issue of cumulative redeemable preference shares (CRPS) to IDBI and IFCI. The Assessing Officer disallowed this expenditure, citing that different accounting systems for shareholders and income tax purposes are not permissible.
3. Nature of Liability Incurred by the Assessee:
The CIT (A) held that the liability was in the nature of interest within the meaning of sec. 2(28A) and not accrued in the year of issue of CRPS but over the period of the loan. The Tribunal examined the facts and concluded that the liability was indeed interest liability and on revenue account. The Tribunal noted that the institutions calculated the present value of future liability, and the assessee compensated this by issuing CRPS, leading to an accelerated accrual of liability.
4. Applicability of Section 43B:
The CIT (A) applied sec. 43B (d), stating that since no amount was paid during the year, the amount was not allowable. The Tribunal, however, held that the assessee made a constructive payment by issuing CRPS, which is a common way of discharging liability. The Tribunal clarified that Explanation 3C to sec. 43B does not apply to the conversion of interest payable into share capital, as the institutions become contributors to the capital and not creditors. The Tribunal concluded that the liability to compensate crystallized in the year under consideration, allowing the deduction of Rs. 6,71,60,000.
Conclusion:
The appeal of the assessee was allowed, and the order was pronounced in the court on 9-5-2008.
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2008 (5) TMI 661
Eligibility for deduction u/s 10B - business of export of computer software - shifted its business to new office - 100 per cent EOU - Jurisdiction of order passed by CIT u/s 263 - HELD THAT:- It is pertinent to note here that the plant and machinery which was brought by the assessee at the new place of business was bearing charge of the bank and financial institution against the loan already availed by the assessee. Therefore the assessee could not dispose of these plant and machinery till the repayment of the earlier loan and consequently discharge of charge. This is a case where the assessee has shifted its ongoing business of export of computer software to a new place located in Software Technology Park of India notified by the Government of India.
Whether the shifting of the business place from a domestic tariff area to a Software Technology Park of India notified by Government of India amounts to formation of business by splitting up or reconstruction of business already in existence as well as by transfer of all plant and machinery previously used to a new business for any purpose as contained in cls. (ii) and (iii) of sub-s. (2) to s. 10A? - HELD THAT:- The shifting of existing business from one place to another place does not amount to forming a business by splitting or reconstruction or by transfer of plant and machinery previously used. In the facts and circumstances of the case formation of new business by splitting up a business already existing is totally ruled out. As far as reconstruction is concerned, it is not a case of transfer of asset and ownership of assets. Moreover, it is only shifting of existing business from a domestic area to STPI and getting approval as 100 per cent export-oriented undertaking. Therefore it is not establishing a new business by transfer of plant and machinery used previously for any purpose.
We are of the considered view that this is not a case of setting up of a new business but only transfer of business place of existing business to a new place located in STPI area and thereafter getting the approval from the authorities and thereby the assessee becomes entitled to deduction u/s 10A. Merely because by shifting the business from one place to another and also keeping some of the plant and machinery as those are bearing charge of financial institution does not violate cls. (ii) and (iii) of sub-s. (2) to s. 10A of the IT Act.
Board in Circular No. 1 of 2005, dt. 6th Jan., 2005 has clarified that the existing undertaking set up in the DTA and drawing profit from export of article shall be eligible for deduction under s. 10B on conversion of the area into EOU on getting approval as 100 per cent export-oriented undertaking. The only instruction (sic-restriction) is that the deduction shall be available only for the remaining period of 10 years beginning with the year in which it got the approval as 100 per cent EOU - Moreover when the claim of the assessee regarding deduction u/s 10A was considered and decided by the AO in the regular assessment and the same issue was taken by the assessee to the CIT(A), the order of assessment was merged with the order of the CIT(A), the order passed u/s. 263 is not sustainable as the CIT has exceeded the jurisdiction in invoking the provisions of s. 263 when assessment order as regards the claim of deduction u/s 10A has been merged with the order of the CIT(A).
Therefore, the order passed u/s 263 is not sustainable and liable to be set aside. Accordingly we set aside the impugned order - In the result, the appeal is allowed.
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2008 (5) TMI 660
Transfer Pricing Determine the Arms length price - Disallowance on interest - expenditure attributable to dividend income by virtue to Section 14A - Deduction u/s 80HHF - Advertisement commission income - consideration revived by the assessee by way of cable subscriptions amounts to turnover - Disallowance of security deposit written off - bad debt written off.
Transfer Pricing Determine the Arms length price - Grant of deduction of 20% of the total payment for licence fee - Payment to two entities - HELD THAT:- In the instant case the assessee has obtained the approval from the RBI before making the payment of licence fee, as such the nature of payment cannot be out rightly rejected or doubted. It requires proper adjudication in the light of detailed analysis and relevant evidences furnished by the assessee. Whereas the AO has disallowed the entire claim of payment of licence fee without looking into the merits of the case and the relevant provisions of the Act. In the impugned assessment year the claim of the assessee should have been examined in the light of the report of the Transfer Pricing Officer and the evidences filed by the assessee but the AO as well as the CIT(A) have not adjudicated the issue in accordance with law. We, therefore, are of the view that this issue requires fresh adjudication - Since the report of the Transfer Pricing Officer has already been obtained and the issue requires proper examination by the AO in the light of the report of TPO, detailed analysis of licence fee paid and other evidences filed by the assessee, we set aside the order of the CIT(A) in this regard and the matter is restored to the file of the AO to readjudicate the issue in terms indicated above.
Disallowance on interest - expenditure attributable to dividend income by virtue to Section 14A - Assessee has incurred interest expenses paid on the Loan borrowings - HELD THAT:- In the instant, case the assessee has paid a substantial amount of interest on the borrowed funds and he has also earned the dividend income from investment in Mutual Funds which is exempted from tax and from the details furnished before the AO and even before us it is not clear as to what was the sources of investment in Mutual Funds. Was it from the aforesaid short term deposits which was initially borrowed from the Credit Lyonnais Bank or the surplus funds of the assessee. Even before to the assessee could not furnish the complete details - We, however, in the interest of justice afford one more opportunity to the assessee to explain with evidence as to from where investments were made in Mutual Funds. If it was made out' of short term deposit with the Scotia Bank corresponding disallowance of interest deserves to be made as the short term deposits was made out of the borrowed funds from the Credit Lyonnais Bank which were kept in short term deposits with the ICIC1 Bank Ltd. first then Scotia Bank - If the assessee succeeds in proving that the investment in Mutual Funds was made out of the surplus funds of the assessee on which no interest was paid no corresponding disallowance can be u/s 14A of the IT matter to the file of the AO with the direction to readjudicate the issue in terms, indicated above after affording an opportunity of being-heard to the assessee.
Deduction u/s 80HHF - Advertisement commission income - HELD THAT:- We find that while re-computing deduction u/s. 80HHF the AO has excluded or reduced 90% of the gross receipt of commission from the profits of business, as computed under the head profit and gains of business or profession in order to compute profits of the business as per clause (baa) of Explanation to Section 80HHF whereas the assessee claimed deduction of 90% of the not commission received. The CIT(A) has simply followed earlier years order and confirmed the disallowance - According to the Revenue the judgment of Bangalore Clothing Co. [2003 (1) TMI 89 - BOMBAY HIGH COURT] has been over ruled by the Apex Court in the case of K.Ravindranathan Nair [2007 (11) TMI 10 - SUPREME COURT] by holding that the processing charged is held to be included in the total turnover and 90% of the same is also to be reduced as per Explanation (baa). But, according to the assessee, the judgment of the Bangalore Clothing Co. of the jurisdictional High Court, as still holds the field inasmuch the issue / question before the Apex Court was entirely different - This controversy has been examined by the Tribunal in the assessee's own case pertaining to the AY 2000-2001. Copy of the Order is placed on record and from its careful perusal we find that Tribunal has examined this aspect in detail with the help of various judicial pronouncements in his order before concluding that judgment in the case of Bangalore Clothing Co. is not over ruled as the judgment of the Apex Court in the case of K.Ravindranathan Nair (supra) was rendered in different contexts - Therefore, On perusal of the order clearly reveals that amendment was made to exclude only those incomes which do not have element of turnover. It is pertinent to note that legislature referred to element of turnover and not export turnover. Therefore, considering the above circular which is binding on the tax authorities, we are of the view that any income arising from an activity involving turnover cannot be excluded from the profits of business in terms of Explanation (baa) to section 80HHC/Explanation (f) to section 80HHF.
Whether consideration revived by the assessee by way of cable subscriptions amounts to turnover - scope of the word 'turnover' may vary in section 80HHC and Section 80HHF - HELD THAT:- In the present case, the right to exhibit the programmes telecasted by various channels owned by 'Star Group' in the Indian territory is with the assessee, the cable operators are the distributors through whom such programmes are exhibited to the subscribers of the public. Assessee receives the consideration on account of transfer of right to exhibition of programmes contained in such software and, therefore, the same would amount to turnover - There is no there that activity of distribution of channel Programmes is an independent activity and therefore the profits arising there-from would also form part of the profits of business. Accordingly, as per the test laid downin the case of K. Ravindranathan Nair, the cable subscription has to be treated as turnover - The test laid down by the Hon'ble Bombay High Court in the case of Bangalore Clothing Co. (supra) is that if the profits arising from an activity is in the nature of operational income then receipts from such activity would form part of profits of business as well as total turnover. There is no dispute that cable subscription activity is part of main objects of the assessee company and therefore the receipts arising from the same would form part of the operational income. Consequently such receipt would form part of turnove - The Constitution Bench of the hon'ble Supreme Court in the case of Navnit Lal C. Jhaveri vs. K.K. Sen [1964 (10) TMI 16 - SUPREME COURT] held that circulars issued by the Board which are beneficial to the assessee are binding on the lax authorities. Keeping in mind the above binding judgement and the circular mentioned, it must be held that cable subscription having element of turnover cannot be executed from the profits of business computed under the head 'profits and gains of business or profession'. We hold accordingly.
We are therefore, of the view that receipt of particular percentage of commission on collecting the advertisements for the principal's cannot be called to be the part of the operational income of the assessee, as such, it attracts the provisions of Explanation (baa) and 90% of the same is to be reduced. Moreover, the commission received from its principal does not have an element of turnover as it is to be received on realisation of consideration from advertisement and as such cannot be included in the total turnover, because it does not accrue from the main business of export of television programmes/content for which deduction under S. 80HHF is claimed - Hence, it falls outside the purview of explanation (1) of S. 80HHF of the Act. We have also considered the alternative arguments of the assessee that netting be allowed in case of Explanation (baa) is held to be applicable. In this regard, we find force in the contention of the assessee and we are of the view that whatever expenses are incurred by the assessee which were not debited to the accounts of the principal, are required to be set off against the commission received by the assessee. If nexus are proved in the light of the Order of the Special Bench in the case of Lalsons Enterprises [2004 (2) TMI 294 - ITAT DELHI-E] and the judgment of the Delhi High Court in the case of Shree Ram Honda Power Equipment [2007 (1) TMI 86 - HIGH COURT, DELHI]. Accordingly, we, restore the matter to the file of the AO to allow netting between the expenses incurred to earn the commission and the commission received, if nexus are proved. Accordingly, this issue is disposed off.
Disallowance of security deposit written off - bad debt written off - HELD THAT:- In the instant case the security deposit, which was claimed to be written off in this year were neither credited to the PandL Account nor taken into account while computing the income of the assessee either in the previous year relevant to the impugned assessment year or in earlier assessment years. We, therefore, of the view that assessee is not entitled for deduction as bad debt written off under Section 36(2)(vii) of the Act - We have carefully examined the facts of the case in the light of the aforesaid judgement and we find that nothing has been brought on record to show that the advance given by the assessee has become irrecoverable. Before the Assessing Officer assessee has claimed deduction of this debt as bad debt by writing it off in the year under consideration under Section 36(1)(vii) of the Act. The claim of the assessee was not examined in the light of the judgement of the jurisdictional High Court in the case of IBM World Trade Corporation vs. CIT. We accordingly set aside the order of the CIT(A) and restore it to the Assessing Officer to examine it in the light of above mentioned judgement. If the advance amount is found to be irrecoverable despite the efforts of the assessee it may be allowed as business loss.
Determination of arms length u/s 92CA(1) - Transfer pricing adjustment - international transactions with associated enterprises - We find that the assessee is in fact involved in three independent activities, i.e. (a) distribution activity for which assessee has to pay the license fee for the right to distribute the Star channels to Asian Broadcasting Corporation Ltd also based in Dubai and Indian Region Broad Casting Ltd., a company based in Hong Kong. This distribution right cannot be linked up with other activities of the assessee, i.e. with commission for collecting the advertisement sales or with the export of TV programmes. The other activity that results in receipt of commission is also independent activity and the assessee acts as a marketing and collecting agent for Star Ltd. and NGC Asia in relation to advertisement sales to the satellite television channels broadcast by them in India - From a perusal of the TPO's report and the detailed analysis furnished by the assessee, we find that neither the assessee has taken the comparable cases involved in similar activities nor the TPO has determined the Arms Length Price in the light of the guidelines laid down by the Special Bench of the Tribunal in the case of Aztec Software and Technical Services [2007 (7) TMI 50 - ITAT BANGALORE] - We are therefore of the view that Arms Length Price in relation to the impugned activities are not properly determined either by the assessee or by the TPO or the AO. As such, it requires a fresh determination in the light of the order of the Special Bench in the case of Aztec Software and Technical Services . We accordingly set aside the order of the CIT(A), confirming the order of the AO in this regard and restore the matter to the file of the AO with a direction to make a further reference to the TPO for determination of Arms Length Price in respect of each of the assessee's independent activities in the light of the comparable cases and also in the light of the decision of the Special Bench of the Tribunal in the case of Aztec Software and Technical Services (supra) and other order/judgment rendered on the issue.
In the result, Appeals of the assessee as well as the Revenue are partly allowed for statistical purposes.
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2008 (5) TMI 659
Running Royalty paid to NR company - Treated as Capital or Revenue expenditure - brand name of "United Colors of Benetton" - Granted exclusive licence to use the trade-marks in India - whether the assessee acquired assets itself or it was merely granted the license to use the trade-marks on the products being manufactured by it - HELD THAT:- On Persual of the license agreement, it is clear that the assessee was only granted non-assignable licence, right and privilege with reference to the licensed marks to manufacture on the mark and distribute the licensed product in India and to use the expression "Benetton". The assessee did not become the owner of the licensed marks or the holder of the trade-marks. Such license marks at all times remain the property of the licensor.
The license was initially granted for a period from October, 1992 till fall/winter season of 1999-2000. However, to continue to use the license mark for manufacturing of the licensed products, the assessee was to pay royalty @ 5 per cent of the amount of net sales. By paying the royalty the assessee did not acquire any right in the licensed trade-marks. Only the products manufactured by the assessee i.e. garments will bear the licensed marks for which the license has been granted. Accordingly it can be said that the assessee has not acquired any capital asset but has merely paid to the licensor for use of such trade-marks. Therefore, expenses are to be treated as revenue expenditure and not capital expenditure.
It is seen that the assessee was required to pay royalty every year. But for payment of royalty every year the assessee could not continue receiving the license to use the licensed marks on the products manufactured by it. Thus making payment every year, it cannot be said that the assessee received advantage of enduring nature primarily to bring it as capital expenditure. Royalty payment is not a one time but rather recurring expenditure merely to use licensed marks.
As rightly contended by the learned counsel for the assessee that granting of exclusive license to the assessee alone in India does not alter the character of payment from revenue to capital.
In the case of Avery India Ltd.[1993 (4) TMI 25 - CALCUTTA HIGH COURT] the Hon'ble Calcutta High Court held that even if the assessee was granted exclusive license, it will not convert the revenue expenditure into capital expenditure. Similar view has been held by Full Bench in the case of Praga Tools Ltd. vs. CIT [1979 (11) TMI 80 - ANDHRA PRADESH HIGH COURT]. We accordingly hold that the expenditures are revenue in nature and even do not bring into existence any capital asset or the assessee receives any advantage of enduring nature so as to treat it as capital expenditure.
In the result, Appeals are dismissed.
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2008 (5) TMI 658
Issues Involved:
1. Delay in filing the appeal.
2. Legality of the order passed by CIT u/s 263.
3. Claim of bad debts.
4. Treatment of capital receipt.
5. Cancellation of assessment u/s 143(3).
Summary:
Issue 1: Delay in Filing the Appeal
The appeal was delayed, but the assessee provided reasons and an affidavit dated 14th Feb., 2008. The Tribunal found sufficient cause and condoned the delay.
Issue 2: Legality of the Order Passed by CIT u/s 263
The assessee challenged the order passed by CIT-1, Rajasthan u/s 263, claiming it was illegal, unjustified, and without jurisdiction. The Tribunal examined the facts and found that the CIT's exercise of jurisdiction was not based on any material evidence and was liable to be set aside. The Tribunal emphasized that s. 263 cannot be invoked merely to conduct short enquiries or reassess the process without substantial evidence.
Issue 3: Claim of Bad Debts
The CIT held that the claim of bad debts of Rs. 14,36,604 was wrongly allowed by the AO, deeming the order erroneous and prejudicial to the interest of the Revenue. The Tribunal, however, found that the assessee had provided sufficient documentary evidence to support the claim of bad debts, including account statements, bank statements, and legal notices. The Tribunal concluded that the CIT's decision was based on suspicion rather than concrete evidence, and thus, the AO's order allowing the bad debts was sustained.
Issue 4: Treatment of Capital Receipt
The CIT questioned the treatment of a receipt considered as a capital receipt by the assessee, suggesting that the issue needed reconsideration. The Tribunal found that the assessee had provided adequate explanations and documentation during the assessment proceedings. The Tribunal held that the right to obtain a conveyance of immovable property falls within the definition of "property of any kind" u/s 2(14) and that the extinguishment of this right constituted a transfer of a capital asset. The Tribunal concluded that the CIT's direction for reconsideration was unwarranted and upheld the AO's treatment of the capital receipt.
Issue 5: Cancellation of Assessment u/s 143(3)
The CIT had cancelled the entire assessment made u/s 143(3) and directed the AO to frame a fresh assessment. The Tribunal found that the AO had made necessary enquiries and reached a definite conclusion based on the evidence provided by the assessee. The Tribunal held that the CIT's action was not justified as it was based on a different view rather than any substantial error in the AO's order.
Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT u/s 263 and sustaining the AO's original assessment. The Tribunal emphasized that the CIT cannot invoke s. 263 merely to take a different view in the absence of substantial evidence.
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2008 (5) TMI 657
Issues involved:
The issues involved in the judgment are the transfer of petitioner's cases from one jurisdiction to another u/s 127(2) of the Income-tax Act, 1961 without providing an opportunity of hearing and reasons for the transfer.
Summary:
The petitioner, a registered partnership firm, objected to the transfer of its cases from Indore to Bhopal by the Commissioner, Income-tax, Bhopal u/s 127(2) of the Act. The petitioner argued that the decision lacked compliance with the Act as no opportunity of hearing was provided, and reasons for the transfer were not communicated. The revenue contended that the transfer was justified as the petitioner's business was in Bhopal. The court noted that the transfer was made without following the requirements of section 127(2) and cited legal precedents emphasizing the mandatory nature of recording reasons for transfers. The court held the transfer decision as contrary to the Act and quashed the communication, allowing the revenue to take necessary steps adhering to the provisions of section 127(2).
In conclusion, the court allowed both petitions, quashed the impugned communication, and directed the revenue to follow the provisions of section 127(2) for any future transfer of cases.
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2008 (5) TMI 656
Issues Involved:
1. Jurisdiction of Land Revenue Court to set aside an ex-parte decree.
2. Validity of service of notice.
3. Applicability of Code of Civil Procedure in partition proceedings under the Punjab Land Revenue Act, 1887.
4. Allegations of fraudulent suppression of notice.
5. Remedies available to a defendant for setting aside an ex-parte decree.
Detailed Analysis:
1. Jurisdiction of Land Revenue Court to Set Aside an Ex-Parte Decree:
The core issue in this appeal was whether the Land Revenue Court had the jurisdiction to set aside an ex-parte decree. The Tehsildar, exercising the power of Assistant Collector, 1st Grade, dismissed an application under Order IX Rule 13 of the Code of Civil Procedure (CPC) on the grounds that the provisions for setting aside ex-parte decrees did not apply to partition proceedings under the Punjab Land Revenue Act, 1887. The Supreme Court, however, held that even if the provisions of the CPC were not directly applicable, the court still had the incidental power to set aside an ex-parte order on the grounds of violation of natural justice.
2. Validity of Service of Notice:
The appellant contended that he had not been served with any notice regarding the partition proceedings, which led to an ex-parte decree. The Assistant Collector noted that notices sent to the appellant were returned unserved, and the address provided was incorrect. The Supreme Court emphasized that substituted service, such as publication in a local newspaper or beat of drum, was insufficient for a person residing abroad. The Court held that proper notice should have been served through the appellant's attorney, considering he had been residing in the USA for over 25 years.
3. Applicability of Code of Civil Procedure in Partition Proceedings:
The High Court had avoided delving into whether the provisions of the CPC were applicable to partition proceedings under the Punjab Land Revenue Act, 1887. The Supreme Court clarified that the revenue officers had the power of a civil court for summoning parties and witnesses. The Court further stated that the principles of natural justice necessitate that the courts have the jurisdiction to set aside ex-parte decrees, irrespective of the specific procedural laws cited.
4. Allegations of Fraudulent Suppression of Notice:
The appellant alleged that the respondent fraudulently suppressed the service of notice. The Supreme Court found merit in this claim, noting that the respondent was aware of the appellant's residence in the USA but failed to serve notice properly. The Court held that fraudulent suppression of notice invalidated the ex-parte decree.
5. Remedies Available to a Defendant for Setting Aside an Ex-Parte Decree:
The Supreme Court highlighted multiple remedies available to a defendant for setting aside an ex-parte decree, including filing an application under Order IX Rule 13, filing a suit alleging fraudulent suppression of service, preferring an appeal, and filing an application for review. The Court referenced the case of Bhanu Kumar Jain v. Archana Kumar, which elucidated that a defendant could pursue both an appeal and an application under Order IX Rule 13 simultaneously.
Conclusion:
The Supreme Court set aside the impugned judgment, directing the appellant to file his written statement within four weeks. The Court emphasized that the principles of natural justice were violated due to improper service of notice and the fraudulent conduct of the respondent. The Court also directed that the case be heard on a day-to-day basis to expedite the proceedings. The appeal was allowed without any order as to costs.
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2008 (5) TMI 655
Claim a deduction u/s 35(1)(iv) - Bank guarantee commission paid to relative of directors - Capital Expenditure incurred on R& D.
Claim for deduction under section 35(1)(iv) - bank guarantee commission paid to relatives of the directors - In CIT vs. Ayurvedic Sevashram (P) Ltd. [1986] 54 CTR (Raj.) 119 : [1986] 159 ITR 112 (Raj.), wherein, on facts also, the assessee company had paid guarantee commission to the relatives of the directors, who had secured finances for the company, and it was found that the deduction had resulted in remuneration to the relatives of the directors of the company. The guarantee commission was paid for securing finances, and thus the deduction was upheld.
In view of the matter, de hors the technicalities, even on merits, in view of the judgment of this Court in Ayurvedic Sevashram's case [1985 (7) TMI 45 - RAJASTHAN HIGH COURT], the finding on this question requires no interference by this Court.
Claim deduction in respect of capital expenditure incurred on R & D of assessee's business - machines, acquired for the purpose of R&D - HELD THAT:- We find is, that the orders are based on the basis of orders passed in earlier years, and in the basic order, we find, that the AO himself had inspected the factory premises, and found, that the plant and machinery purchased, were being used by the assessee for the purposes of maintaining its quality control. Purchasing of plant and machinery is, thus, not in dispute, may be that appropriate accounting in this regard may not have been made, as some entries have been made later, but then, it has not been found by the AO, that the items claimed to have been purchased were not purchased, or were not available, or were purchased in some other financial year, than the one in which credit is claimed.
This conclusion of the AO, arrived on the basis of personal inspection of the factory premises by the AO, has not been assailed by the Revenue to be not correct, or to be requiring any interference, for us there is no escape from the conclusion that the items are used for quality control in R&D. That being the position, in our view, it cannot be said that the deduction is allowable, without holding any enquiry, into the relevant question. It has been found by the learned CIT(A) that the assessee does hold recognition from the concerned Department of the Government, to which it is regularly furnishing tri-annual returns, and the recognition did subsist during all the relevant assessment years.
Thus, Tribunal was correct in allowing the deduction. Obviously it is answered against the Revenue and in favour of assessee.
The net result is, that we do not find any force in any of these appeals, the same are consequently dismissed.
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2008 (5) TMI 654
Issues:
Challenge to judgment granting bail to respondent by Single Judge of Gauhati High Court, Imphal Bench, upholding order passed by Learned Special Judge, NDPS, Manipur in Crl. Complaint case no.32 of 2000.
Detailed Analysis:
1. Background:
The appellant received information about a Tata truck carrying ganja, intercepted the vehicle, and recovered 6 packets of ganja. The respondent was arrested under the Narcotic Drugs and Psychotropic Substance Act, 1985. Bail was granted to the respondent by the Special Judge, which was challenged in the High Court.
2. Section 37 of the Act:
Section 37 of the Act makes certain offences non-bailable, including those punishable under specific sections. Bail can only be granted if the Public Prosecutor has an opportunity to oppose it and the court is satisfied that the accused is not guilty and will not commit any offence while on bail. The Trial Court and High Court did not consider the implications of Section 37.
3. Precedents and Case Law:
Various judgments were cited to emphasize the importance of Section 37 in granting bail under the NDPS Act. Cases like Union of India v. Gurcharan Singh and Narcotics Control Bureau v. Karma Phuntsok highlighted the mandatory nature of Section 37 and the need for the court to hear the Public Prosecutor before granting bail.
4. Analysis of Previous Cases:
The judgments of Union of India v. Abdulla and Collector of Customs v. Ahmadalieva Nodira stressed the necessity for the court to establish reasonable grounds for believing the accused is not guilty and will not commit further offences while on bail. Failure to adhere to these requirements renders the bail order unsustainable.
5. Conclusion:
The Trial Court and High Court failed to consider the provisions of Section 37 while granting bail to the respondent. As per the established legal precedents and the mandatory nature of Section 37, the order granting bail was unsustainable and was set aside by the Supreme Court. The appeal was allowed, emphasizing the importance of following the legal requirements for granting bail under the NDPS Act.
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2008 (5) TMI 653
Issues Involved:
1. Interpretation of the exemption notification under the Drugs (Price Control) Order, 1995.
2. Applicability of the exemption notification post the expiry date.
3. Legality of the demand for recovery of alleged overcharged amounts.
Detailed Analysis:
Interpretation of the Exemption Notification under the Drugs (Price Control) Order, 1995:
The case revolves around the interpretation of the exemption notification dated 29th August 1995, issued under paragraph 25 of the Drugs (Price Control) Order, 1995. The notification exempted the first respondent, a pharmaceutical company, from price control measures for the bulk drug Pentazocine and its formulations until 31st October 1999. The key issue was whether this exemption applied only to drugs manufactured up to the specified date or also to those sold after the expiry date. The Supreme Court held that the exemption notification should be interpreted pragmatically, considering the entire process of manufacturing and marketing the drug. It concluded that the exemption applied to drugs manufactured by the company up to 31st October 1999, even if sold thereafter.
Applicability of the Exemption Notification Post the Expiry Date:
The appellant argued that the exemption ceased to apply after 31st October 1999, and any drugs sold post this date should adhere to the price control measures. The Supreme Court rejected this view, stating that the exemption notification was clear and unambiguous. It emphasized that the exemption was related to the drug's manufacture, not its sale. The Court recognized the practical realities of the pharmaceutical industry, noting the time lag between manufacturing and actual sale. It ruled that the exemption applied to drugs manufactured up to the expiry date, irrespective of their sale date.
Legality of the Demand for Recovery of Alleged Overcharged Amounts:
Following the expiry of the exemption, the first respondent was issued a notice demanding recovery of Rs. 2,59,76,070/- for alleged overcharging, along with interest. The first respondent contended that no overcharging occurred and that all required information was provided to the authorities. The Supreme Court found the demand for recovery unjustified, as the exemption notification covered drugs manufactured up to the specified date, regardless of their sale date. The Court dismissed the appeal, affirming the High Court's decision that the exemption applied to drugs manufactured by 31st October 1999, even if sold later.
Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's interpretation of the exemption notification. It ruled that the exemption applied to drugs manufactured up to 31st October 1999, irrespective of their sale date. The Court emphasized the need for a pragmatic and purposive interpretation of exemption notifications, considering the practical aspects of manufacturing and marketing drugs. The demand for recovery of alleged overcharged amounts was deemed unjustified, and the appeal was dismissed with costs.
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2008 (5) TMI 652
Issues involved:
The judgment deals with the issue of whether the availability of an alternative remedy is an absolute bar for granting relief under Article 226 of the Constitution.
Details of the Judgment:
Issue 1: Availability of Alternative Remedy
The appellant had booked rakes for carrying coal, and a sum of &8377; 3,56,69,671/- was collected from the appellant by mistake. The respondent admitted the mistake, but the High Court dismissed the writ petition, directing the appellant to approach the Railway Claims Tribunal for alternative remedy under Section 13 of The Railway Claims Tribunal Act, 1987. The Supreme Court held that the High Court erred in rejecting the claim solely on the ground of the availability of an alternative remedy. Since the respondent had admitted liability, the High Court should not have directed the appellant to resort to the alternative remedy. The Supreme Court set aside the High Court's order and directed the respondents to pay the admitted liability with interest at the rate of 6% p.a. from 6th January, 1993, within three months from the date of the judgment.
Conclusion:
The Supreme Court allowed the appeal, emphasizing that the availability of an alternative remedy is not an absolute bar for granting relief under Article 226 of the Constitution when the respondent has admitted liability.
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2008 (5) TMI 651
Disallowance of net interest paid and brokerage expenses - trading additions - Disallowance on interest and brokerage - disallowance on account of telephone expenses, vehicle expenses and depreciation on account of personal use - Interest under s. 234B.
Application for condonation of delay under s. 5 of Limitation Act - delay for about 43 months - sufficient cause for delay present or not - HELD THAT:- No presumption can be made that the delay has been occasioned deliberately or on account of culpable negligence or on account of mala fides. The litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. Therefore, Following the decisions of Hon'ble Supreme Court of India in the case of Collector, Land Acquisition vs. Katiji & Ors. [1987 (2) TMI 61 - SUPREME COURT] and in the case of N. Balakrishnan vs. M. Krishnamurthy [1998 (9) TMI 602 - SUPREME COURT], we are satisfied that sufficient cause exists for delay in the present case and therefore delay in filing the appeal before us is condoned.
Estimation of income - GP rate of 34 per cent on the estimated turnover - Trading addition - income from sale of milk, curd, sweets, namkeens etc. - HELD THAT:- Assessee has declared better results as compared to the preceding years in assessee's own case and there is no comparable case on record which could suggest the disturbance in the GP declared by the assessee. Therefore, In view of the decision in CIT vs. Gotan Lime Khanij Udhyog [2001 (7) TMI 19 - RAJASTHAN HIGH COURT], we are of the view that no trading addition is required to be made by the AO. Therefore the addition confirmed by the learned CIT(A) is directed to be deleted.
Disallowance on interest and brokerage - business purposes - investment in personal immovable properties consisting of agricultural land, residential plot, etc - HELD THAT:- There is no nexus of the loans raised and the investment in properties. Assessee has purchased the properties in the preceding years out of the interest-free funds and there is nothing on record that the loans raised in M/s Chawala Sweets have been utilized for the purpose of purchasing the properties in the personal name of the assessee - Since, properties have been purchased in the preceding years since 1990-91 to 1998-99 and no disallowance of interest u/s 36(1)(iii) of the Act has ever been made in those years and also thereafter till date. Our views find support from the decisions of Hon'ble Madras High Court in the case of CIT vs. Hotel Savera[1997 (11) TMI 37 - MADRAS HIGH COURT], Hon'ble Supreme Court of India in the case of Munjal Sales Corporation vs. CIT & Anr. [2008 (2) TMI 19 - SUPREME COURT] - Therefore, AO is not justified in disallowing the interest claimed by the assessee - disallowance confirmed by the learned CIT(A) is directed to be reversed and addition made is directed to be deleted.
Disallowance @ 20 per cent on account of telephone expenses, vehicle expenses and depreciation on account of personal use - rejected books of account - HELD THAT:- Since the books of account of the assessee have been rejected and no explanation with regard to the said expenses to the satisfaction of the authorities below or even before us have been placed on record that all the expenses have been incurred wholly and exclusively for the purpose of business. The non-business purpose in such expenditures cannot be ruled out has rightly been observed by the authorities below but the disallowance appears to be on the higher side looking into the turnover, business and facts of the assessee. The AO is directed to restrict the disallowance to 10 per cent of the expenditure on account of telephone, vehicle and the depreciation as claimed by the assessee. The assessee gets the part relief accordingly.
Interest under s. 234B - HELD THAT:- The charging of interest under s. 234B is mandatory and is consequential in nature - the issue is general in nature and therefore does not require any adjudication.
In the result, the appeal of the assessee is partly allowed.
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2008 (5) TMI 650
The High Court of Allahabad in 2008 ruled that the Assessing Officer had the power to modify the Eligibility Certificate for exemption under section 4A. The impugned order dated 29.5.2008 was stayed, and a counter affidavit was to be filed within a month.
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2008 (5) TMI 649
Whether a direction by the Civil Court to reinstate the respondent, amounted to granting specific performance of a contract of personal service which is barred by section 14 of Specific Relief Act, 1963?
In the absence of a pleading that the order imposing penalty was invalid because the Appointing Authority acted on the advice or recommendation of the Chief Vigilance Officer, and in the absence of any issue in that behalf, could the Courts below hold that the order imposing punishment was illegal on that ground?
Whether an order recorded by the Appointing Authority on an office note, to impose the penalty of reduction in pay, which was neither pronounced, published or communicated, is a final decision which could not be reconsidered or altered, by the Appointing Authority?
Whether the decision of the Appointing Authority imposing penalty can be said to have been influenced by extraneous material, merely because the Chief Vigilance Officer of the Bank requested him to re-examine the proposed penalty ?
Whether the Appointing Authority ought to have communicated the advice/recommendation of the Chief Vigilance Officer to the respondent and given him an opportunity to show cause before imposing punishment?
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2008 (5) TMI 648
Issues Involved:
1. Effect of internal circulars issued by the Department of Telecommunications (DOT) on contracts.
2. Payment of charges for leased circuits.
3. Premature surrender of leased circuits.
4. Dispute regarding the minimum guarantee period for leased lines.
5. Tariff rates applicable to email service providers.
Issue-wise Detailed Analysis:
1. Effect of Internal Circulars Issued by DOT on Contracts:
The core question was whether internal circulars issued by DOT could affect the terms of contracts between the parties. The Tribunal (TDSAT) held that internal circulars, not being statutory, cannot alter the terms of concluded contracts unless explicitly incorporated into the contract. The Supreme Court upheld this view, stating that internal circulars, published for official use, do not have the force of law and cannot unilaterally change contractual terms.
2. Payment of Charges for Leased Circuits:
Several appeals involved disputes over the payment of charges for leased circuits. The respondents (service providers) argued that the charges should be based on capital cost as per the initial agreement, while DOT demanded higher charges based on internal circulars. The Supreme Court noted that the respondents had agreed to a rent and guarantee (R&G) basis calculated on capital costs. The Court found that DOT's demand for higher charges based on internal circulars was unjustified as these circulars were not part of the contract and were not known to the respondents.
3. Premature Surrender of Leased Circuits:
One appeal involved the premature surrender of 15 leased circuits. DOT contended that the minimum lease period was three years, while the respondents claimed they were unaware of this stipulation. The Tribunal found that the minimum period was not clearly communicated to the respondents and that internal circulars could not impose such terms unilaterally. The Supreme Court upheld this finding, emphasizing that contractual terms must be clearly stated and agreed upon by both parties.
4. Dispute Regarding the Minimum Guarantee Period for Leased Lines:
Another appeal involved a dispute over the minimum guarantee period for leased lines. The Tribunal held that the minimum guarantee period of three years, as per Rule 434 of the Indian Telegraph Rules, did not apply to the contracts in question. The Supreme Court agreed, noting that the contracts were for one year, and any change in terms required mutual agreement. The Court also observed that the internal circulars cited by DOT were not applicable to the specific contracts.
5. Tariff Rates Applicable to Email Service Providers:
In cases involving email service providers, the Tribunal found that DOT had incorrectly charged double the rental rates based on an internal circular. The Tribunal ruled that email services did not fall under the category of close user group services and should not be charged double. The Supreme Court upheld this decision, stating that internal circulars could not override the terms of the contract or the published tariffs.
Conclusion:
The Supreme Court dismissed the appeals, affirming that internal circulars issued by DOT do not have the force of law and cannot alter the terms of concluded contracts unless explicitly incorporated. The Court emphasized the necessity of clear and mutual agreement on contractual terms and found that DOT's demands based on internal circulars were unjustified. The appeals did not raise any substantial question of law warranting interference, and the judgments of the Tribunal were upheld.
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2008 (5) TMI 647
Liability to pay property tax and other taxes under the provisions of Delhi Municipal Corporation Act, 1957 - Entitlement for exemption from Payment of Municipal Taxes u/s 184 of 1989 Act - "Railway Administration" includes "Metro Railway"? - Interpretation of Section 184 and the term "railway administration" and whether it includes properties not specified in Clauses (a) to (f) of Section 2 (31) of 1989 Act - HELD THAT:- Two similar terms can have two different meanings under two enactments depending upon the context in which the said terms have been used. Therefore, it will not be proper to import the definition of the terms "Metro Railway", etc. used in 2002 Act into 1989 Act. 1989 Act is a separate enactment and it's clauses have to be interpreted as per the definition given to the said term in the said enactment. Recourse to 2002 enactment is not permissible to define "Railway Administration" under 1989 Act. It is also equally well settled that there can be two separate enactments dealing with the same subject matter and the question which one of the two enactments will prevail on a particular issue or question, may arise in a given case, but the said question is not relevant and material for the present controversy.
Therefore, it is not possible to hold and accept the contention of the respondent corporation that the petitioner ceases to be "railway administration" within the meaning of Section 2 (32) of 1989 Act in view of definition clauses in 2002 enactment or as 2002 Act stands enforced. Moreover, the expression "Railway" is generic in nature and the expression "Metro Railway" is a mere specie. "Metro Railway" will be included and forms part of the generic expression "Railway".
Anything which falls within the definition of term "Railway" cannot be taxed by the respondent under the Delhi Municipal Corporation Act, 1957 in view of Section 184 of the 1989 Act. However, the respondent is entitled to tax under the Delhi Municipal Corporation Act, 1957 the assets and properties, which do not fall and are not "Railways" within the meaning of Section 2 (31) of the 1989 Act. A bare reading of the Section 2 (31) of 1989 Act will show that lines, electrical equipments, installations, stations, warehousing workshops, running room, rest house etc. constructed for the purpose of or in connection with the railway are exempted from taxation under the Delhi Municipal Corporation Act, 1957. The Delhi Municipal Corporation will have to establish and show that a particular building or asset can be taxed under the Delhi Municipal Corporation Act as it does not fall within the meaning of "Railway" as defined in Section 2 (31) of 1989 Act. This aspect requires examination and to this limited extent the matter is remanded back to the Assessor and Collector for fresh adjudication. The Assessor and Collector will keep the ratio of this decision in mind and ensure that properties or assets mentioned in Section 2 (31) of 1989 Act are not taxed. He shall give a specific finding on each asset/property brought to tax. The petitioner will cooperate and furnish all details, documents and information in this regard to the Assessor and Collector.
Therefore, it is held that the petitioner is entitled to exemption from payment of municipal taxes in view of Section 184 of 1989 Act, but only in respect of assets/properties which have been defined as Railway in Section 2 (31) and not in respect of other assets/properties. It is also clarified that this is subject to issue of notification by Central Government withdrawing the said exemption and also subject to right of the respondent- Delhi Municipal Corporation to raise and claim property tax from third parties, if permissible and allowed under law.
The writ petition is accordingly allowed to the extent indicated above.
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2008 (5) TMI 646
Issues:
Validity of market fee levy on Zafrani Zarda under Bihar Agricultural Produce Market Act, 1960.
Analysis:
The judgment involved three appeals questioning the validity of market fee levy on Zafrani Zarda under the Bihar Agricultural Produce Market Act, 1960. The writ petitioners, who are manufacturers of Zafrani Zarda, contended that Zafrani Zarda is a manufactured form of tobacco. The Supreme Court referred to a previous case where the definition of 'agricultural produce' was expanded to include 'manufactured goods' from tobacco. It was noted that Zafrani Zarda was added to the Schedule of the Act in 1991 through a notification by the State of Bihar.
The State Government issued another notification in 1992 to regulate the sale, purchase, storage, and processing of agricultural produce, including Zafrani Zarda. The writ petitioners challenged the assessment of market fee based on these notifications. The High Court, in its judgment, held that the market fee would be leviable from 31st August, 1992, failing to address key contentions raised by the parties. The High Court did not consider the validity of the notifications or the argument that certain provisions of the Act were not applicable.
The Supreme Court found the issues raised by the parties to be significant and should have been addressed by the High Court. Therefore, the impugned judgment was set aside, and the matters were remitted back to the High Court for reconsideration. The Court directed the High Court to dispose of the cases expeditiously, preferably within six months. Any additional contentions raised by the parties would also be considered by the High Court on their merits. The appeals were disposed of with no order as to costs.
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2008 (5) TMI 645
The Supreme Court dismissed a civil appeal based on a previous judgment in Civil Appeal No. 5401 of 2007 (Union of India & Anr. v. Vicco Laboratories). (Citation: 2008 (5) TMI 645 - SC Order)
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2008 (5) TMI 644
Whether the communication of an order meant its actual receipt by the concerned official as the requirement of law was that the order to be effective was required to be dispatched before the proposed date of retirement to the correct address of the concerned officer and its receipt after the date of the retirement would be irrelevant?
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2008 (5) TMI 643
Issues Involved:
1. Compliance with Section 42 NDPS Act.
2. Compliance with Section 50 NDPS Act.
3. FIR number on documents before FIR registration.
4. Link evidence concerning seal movement.
5. Non-association of independent witnesses.
6. Delay in sending samples to CFSL.
Issue-wise Detailed Analysis:
1. Compliance with Section 42 NDPS Act:
The appellants argued that the secret information received on 15th January 2000 was not reduced to writing and forwarded to a superior officer, thereby violating Section 42 of the NDPS Act. However, the court noted that the search and seizure took place in a public place, specifically the roof of Palika Bazar car parking, making Section 43 applicable instead of Section 42. The court found that both pieces of information received on 15th and 18th January 2000 were reduced to writing, thus complying with the mandatory requirements. The court cited the Supreme Court's decision in Narayanaswami Ravishankar v. Asst. Directorate of Revenue Intelligence to support its conclusion.
2. Compliance with Section 50 NDPS Act:
The appellants contended that the notices under Section 50 were manipulated as they contained the FIR number, which should not have been available at the time of the search and seizure. The court clarified that the recovery was from a bag and not from the person of the accused, thus Section 50 did not apply. The court referred to several Supreme Court judgments, including State of Himachal Pradesh v. Pawan Kumar, which held that Section 50 does not apply when the recovery is from a bag. The court also noted that the mere writing of the FIR number on the arrest and search memos does not entirely falsify those documents, citing Radhey Shyam v. State of Haryana.
3. FIR Number on Documents Before FIR Registration:
The appellants argued that the FIR number on the documents prepared at the time of the search and seizure indicated manipulation. The court found that no specific question was put to the officers concerned in their cross-examination about the FIR number. The court concluded that the writing of the FIR number was likely for cross-verification of details and did not vitiate the case of the prosecution.
4. Link Evidence Concerning Seal Movement:
The appellants claimed that the link evidence concerning the movement of the seal was not established, suggesting possible fabrication of evidence. The court examined the evidence and found that the seals were handed over to SI Anil Kumar and that the CFSL Form and the samples were intact. The court noted that the defense did not cross-examine the witnesses on the receipt of the CFSL Form, leading to the conclusion that the form was indeed sent with the parcels. The court rejected the appellants' contention regarding the link evidence.
5. Non-association of Independent Witnesses:
The appellants argued that the failure to associate independent witnesses for the arrest and seizure rendered the prosecution's evidence unreliable. The court referred to Supreme Court judgments, including P.P. Beeran v. State of Kerala and M. Prabhu Lal v. DRI, which held that non-association of independent witnesses is not fatal if efforts were made to associate them. The court found that every effort was made to associate public witnesses and that the raid had to be organized in a very short time, thus rejecting the appellants' contention.
6. Delay in Sending Samples to CFSL:
The appellants contended that the 13-day delay in sending the samples to the CFSL was unacceptable and raised doubts about the authenticity of the samples. The court examined the evidence and found that the samples were kept in a safe environment in the Malkhana during this period. The court referred to Supreme Court judgments, including Valsala v. State of Kerala, which held that the delay in sending samples is not material if the samples were in proper custody and form. The court concluded that the delay did not affect the case of the prosecution.
Conclusion:
The court found no legal infirmity in the impugned judgment and order of the learned trial court and dismissed the appeals. The court upheld the conviction and sentencing of the appellants under Sections 21 read with 29 of the NDPS Act.
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